By Prerna Bedi and Emma Rumney BENGALURU/LONDON (Reuters) – Philip Morris International said on Tuesday that price changes and promotions had driven higher growth in third-quarter sales of nicotine pouch brand Zyn but that the strategy had an impact on its operating income. Shares in the world’s largest tobacco company by market capitalization fell almost […]
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Philip Morris boosts third-quarter Zyn sales, but at a cost
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By Prerna Bedi and Emma Rumney
BENGALURU/LONDON (Reuters) – Philip Morris International said on Tuesday that price changes and promotions had driven higher growth in third-quarter sales of nicotine pouch brand Zyn but that the strategy had an impact on its operating income.
Shares in the world’s largest tobacco company by market capitalization fell almost 6% in early trade, even after it raised its annual earnings per share forecast for the third time this year.
PMI has been counting on newer products, such as Zyn, to offset long-term declines in cigarette brands Marlboro, Chesterfield and others.
Zyn, which users insert under the lip to get a nicotine buzz, has become a star performer in PMI’s portfolio boosted by rapid U.S. growth. But it has disappointed investors recently.
ZYN SHIPMENT VOLUMES GROW, BUT DOUBTS LINGER
While still by far the leading pouch label in the U.S., Zyn’s sales performance has been hit by supply constraints, and it now faces growing competition from rivals offering cheaper prices.
PMI said that it had taken steps to “ensure competitive price positioning” and launched promotions during the quarter. This impacted third-quarter revenues and operating income growth in the Americas, PMI said, but also drove growth.
Zyn shipment volume grew 37% to 205 million cans in the United States, and more than doubled outside the U.S. and Nordics.
Bernstein analyst Callum Elliot said that while Zyn’s third-quarter growth was reassuring, questions remained about how sustainable this was given it was promotion-driven.
PMI had also trimmed the top end of its forecast range for annual operating profit growth due to higher U.S. investments, likely related to Zyn, he added.
The company expects an adjusted annual profit of $7.46 to $7.56 per share, compared with its prior forecast of $7.43 to $7.56.
Analysts expect PMI to log an adjusted profit of $7.53 per share for the year.
It reported a third-quarter adjusted profit of $2.24 per share, beating analysts’ average estimate of $2.09 per share, according to data compiled by LSEG.
(Reporting by Prerna Bedi in Bengaluru and Emma Rumney in London; Editing by Shinjini Ganguli and Joe Bavier)